Pakistan's best domestic bank 2020: HBL
Since Muhammad Aurangzeb took over as president and chief executive nearly two years ago, Pakistan’s biggest commercial bank has turned around and moved on from the compliance and reputational issues of the past.
Profits before tax at HBL rose 34% year on year in 2019, revenues climbed 25%, net interest income jumped 24%, total domestic deposits increased 13.5%, advances were up 8% and return on average assets inched higher from 0.4% to 0.5%.
All the signs show that HBL is recovering, following a $225 million fine for compliance breaches by New York’s bank regulator in 2017. That chapter has nearly come to an end, with HBL’s New York branch set to close on March 31.
The bank still has some headaches, in particular an investigation by the United Arab Emirates’ central bank into alleged violations of anti-money laundering and terrorism-finance laws. But these problems also date back to 2017, and HBL has put stricter compliance processes in place since then.
Aurangzeb has worked hard to address the causes of these problems since he took over as chief executive in April 2018. The top-line numbers prove that he is steering the bank in the right direction. And the fact that most, if not all, of HBL’s businesses performed strongly last year is further testament to his leadership.
HBL has a 13% market share of lending to small and medium-sized enterprises in Pakistan as of September 30, 2019. Its SME book was about $356 million, up 12.3% year on year.
The bank’s commercial banking division also outperformed, with the lending book rising 21% in Pakistani rupee terms. The unit also scored a record high profit after tax, equivalent to $14.9 million in the year to September 30, 2019.
In corporate and investment banking, HBL’s franchise was strong, with senior bankers focusing on diversification of sectors and working with sponsors with a good track record. The bank led the way in the healthcare sector, for instance, an industry that does not traditionally see much bank lending.
HBL was quick to focus on Pakistan’s growing ties with China as a source of business. The bank is the only one in Pakistan to have a dedicated China coverage desk – and is on track to open a branch in Beijing in the third quarter of this year. It has about 22 people in that team, across four cities in Pakistan, and has a mainland-focused relationship manager based in the UAE. The bank is working on a planned panda bond for the Pakistan government.